tv Your Bottom Line CNN March 26, 2011 9:30am-10:00am EDT
sending you to the royal wedding, possibly. sending an i-reporter to london. head over to our website and send a video saying why it should be you we send over to cover the royal wedding. a winner then will be picked on april 11th. the unstable international climate is keeping fuel costs high. our christine romans has tips that could save you money. "your bottom line" starts right now. unrest in the middle east. a bombing campaign in libya and a nuclear disaster in japan. oil prices top $105 a barrel for the first time since 2008. bringing t the national convers again to how america gets and consumes its energy. professor of international business at university of maryland, peter, you say high oil prices could cause a second
recession. why? >> well, simply, oil, $105, gas at $3.60. gdp, 3 1/2% to 3%. if it goes to $4 a gallon, enough to take 2.5% not self-sustaining. at that point employers lay workers out and you get on the down side of the power curve. >> and for american urban radio networks, people feel energy policy in terms of what it cost to fill up their gas tank. that's what they're concern about here. is the president communicating what his policy is? he did come out after japan and said, look, i am still behind nuclear energy in this country. how is the message from the white house on this? >> christine you know, every day in the briefing room and the president said himself being peppered with questions as press conferences, look, we are looking at the long term which is, again, the green energy solar, wind, things of that nature. at the same time, people are
concerned. right now a lot of people don't have hybrid cars and are dealing with the gas prices. i just went to the pump and spent, this is low, $3.49 for regular to fill up my gas tank. again, because you can't do anything really in the short term he's looking at a long-term approach. one thing he can do. he can ask other countries to increase oil production, and you have to remember, some oil analysts said this as well. if, indeed this country were to siphon all the oil and we would use our own oil, other countries would lower their production. and that would make us still have large oil prices or gasoline prices at the pump. so it's -- it's -- the devil's in the details. >> peter, switch to you. you and i talked about this for years, america's energy policy, where we're going, how we have to use these times of rising oil prices, or unrest in the middle east, to refocus our effort in energy independence. 57% of people polled by cnn approve of using nuclear energy
for electricity. but two nuker there plants plans for texas are on hold. citing uncertainty after japan. on the nuclear energy front, are we headed into a new era of not in the my backyard, do you think? >> i think we are. a slowdown in the buildout of nuclear energy, essentially means we'll have to drill more domestically or face much slower growth. the president's program is built out alternative energy, battery powered cars, so forth, about as much as is possible. at these times, if we produced more domestic oil, the white house is correct. it might not bring prices down very much, at least the money would be staying here. you know, if we were paying $3.60 a gallon for domesticry plowed oil instead of arbitrarily shutting down gulf drilling as we have done, then that money would stape in the united states and growth would not slow. when we send money abroad to buy oil and we pay more for it and it doesn't come back to buy our exports, growth slows. and now we're very close, very close, to a second recession, as
a consequence of not drilling in the gulf and drilling in other places. the white house has misplaced its emphasis. >> peter, some say -- other energy watchers told me you need to have sustained gas prices above $4 before it's really going to hurt the consumer. you think we could have a second recession at this level of gas prices? or you think we have to have higher gas prices than this? >> the thing is, hurt the consumer. what does that mean? every time you pay more for gasoline, you have to take money out of savings, people don't have a lot of these days, or they have to divert purchases from something else. fewer restaurant meals. a couple less garments purchased this year. things of that nature. those all slow down the economy. when money leaves the country, that doesn't return, to pay for imported oil, it slows the economy. it's a tax. $1.40 a gallon, $4 a barrel. in my estimation that would do it if it happens right now. >> i want to ask you both this
question. the president said he's ready to tap the strategic petroleum reserve if it comes to that. april, do you think politically he can get in there and use some of that $727 million barrels of oil to try to lower gas prices? you think he'd do it? >> politically, you'll never find a consensus whether he should or should not. one thing going. but at the same time, we're seeing some perilous days as far as the economy and energy is concerned. but we always have to remember that there is tomorrow. so if you do indeed tap, the question is are you going to replace, and replace what you took plus some? that's really the issue. >> right. what do you think, peter? >> if gasoline is at $3.60 a gallon plooiing oil at $1.05. start to draw it down. 700 days worth of supply if you want to bring down prices by, say, 10%, 20%. so it's a viable policy. but if oil goes to $140 a
barrel, gas is $4, to buy the impact to make a difference, less than a year's supply. not a great strategy. bottom line, every time we have one of these crises people suggest drilling more, developing more domestic oil. until we can get to that day we can use alternatives to push out gasoline korch suchgs. they say if we do that, won't help this time. if we did it now, then, two, three years from now we wouldn't be so vulnerable yet again. seems as though this administration wants to think ten years out. never. two years out. that is a real problem. it's made america as vulnerable as it is now. >> thank you so much. april ryan, peter, thank you. have a wonderful weekend. heard it before. hearing it again. $5 gas? is it eve be possible? better yet, who cares? what you can do about it. what are you gonna miss when you have an allergy attack? benadryl® is more effective than claritin® at relieving your worst symptoms and works when you need it most. benadryl®. you can't pause life.
but actually, it's easier than you think, because general mills big g line of cereals is america's number one source of whole grain at breakfast. there's whole grain in every box... ♪ ...from chex... to cheerios... to lucky charms. so you can get the whole grain you want with the taste you love. get started on the whole grain you're missing with your favorite big g cereals. make sure to look for the white check.
to drying, brake slowly, all counts in saving gasoline pap more aggressive driver burns more gasoline. >> this is key. your car tuned up. efficient, running well. at $3.50, $3.60 a gallon it matters. >> tune-up the operative term with all the purcomputers. >> i'm showing my old, my dad's a car guy kind of thing. >> whatever to bring it into op condition. having a computer re-create it all cuts counts. >> find the cheapest gas in your neighborhood. there are different ways to do that. i caution, too, that you don't want to, like, drive an extra five miles to go find that, but make sure that the cheapest gas is on the route to wherever you're going. how do you do that? >> look around. a little biased, aaa has a fuel gauge report. let's you know the average prices in the metro paul kin
area. also fuel price find at aaa.opusnet.com. put in a zip code and designate an area of one, five, ten mimes and shows all the gas prices in that area. >> just me or just off an on ramp or off ramp you're likely to pay more? >> they know they've got you. on a highway or something. in the neighborhood before you head out on the highway, gas up at the local station before you get the highway stations. >> something i wasn't aware of. purchase gas at the coolest time of the day. why? >> well, gasoline changes its density based on temperature. the cooler, the more dense the gasoline. you'll get slightly more for your money. the hot ter is the less dense. in fact, pumps in california, people want them to have chillers on them to make the gas less dense. haters on the pumps in canada. giving out more gasoline for the money and have taken the action where they would lose money. >> there you go. proper tire inflation.
we've heard this millions of times. you don't want them underinflated, or over inflated. just right. >> very important. pound for pound underip flated you lose 1% of your fuel economy per tire and most during the winter when the volume goes down, cold contracts, heat expands, are driving around on under inflated tires. minimally once a moshgs ideally once a week check tire pressure up to the manufacture's specifications ever the vehicle chcts get the junk out of the trunk. >> junk out of the trunk. got to do it. government clubs, baby stroller, bags of dirt. >> if you've got an suv, the third row seat mightation 100, 150 pounds. pull it out. whatever extraneous material you're carrying around. >> get rid of it. >> burns gas. >> right. have a great weekend, you. >> you, too. a country of almost 308 million people, only 19,000 new homes were sold in february. why aren't people buying hows? plus what to do if you're
just weeks before the all-important spring selling season in real estate, frigid number. sales of existing homes fell 9.6% in february. new home sales had the worst month since records had been kept in 1963. a terrible 12 months for housing sales. at the same time, the value of the house is falling. the median house price declined 5.2% from february 2010. mike godfrey is a licensed realtor in real estate intervention. mike, what's it going to take to get people to buy houses? >> i'm not surprised by these numbers at all, christine. obviously, people are afraid. i think that people don't want to invest in homes right now, and coupled with the fact we're starting to see mortgage rates begin to inch back up again,
people don't want to be in the marketplace. what i i think we need do to get them to do that? i think real estate is just like securities. over time people will come back to the market. i am absolutely sure the sun will come up tomorrow and absolutely sure the real estate market will recover as well. i think it's just going to tame time for us to get through this painful period in this recovery that's going to put us in a position where real estate will again create equity. >> and like securities, there are people with money right now who are seeing a once in a lifetime opportunity, but there are people, author of buy, close, move in, even with housing affordability, better than a generation, still it's not enough for them to get the loan, get in the house and get moving. when does that happen for people? >> it all starts with, can you actually even afford to buy? lenders are being so strict on their requirements that there are all kinds of people who might like to bay property. they don't qualify. five years ago, literally, you
had a pulse, you could get a loan. today's today, a lot more difficult. >> talk about how difficult. almost 28% down for a loan. you have to show that you've got six months or a year of utilities and mortgage payments in the bank. you have to have a very good credit history. maybe 750 or higher on your credit report. that leaves a lot of people who have been dinged out, dinged by the recession, out of this game. doesn't it? >> it does. and you left off the biggest part which is you actually need cash for a down payment these days. >> right. >> it's not just talking about 3.5%. you're going to see fha raise up how much you need for a down payment probably to 5%. already at 10% you're going to do a little better on some of their fees and points. in addition to that, the conventional loan market doesn't really want to look at you if you don't have 10% or 15% to put down and preferably like 20% or 25%. looking to invest in property, you're going to have to have 25%, 30% or 35% cash.
in fact, cash is king right now. the percentage of buyers paying cash for property is somewhere over 30%. it's really one of the highest i've ever seen. >> talk more about that in a couple minutes. mike, talk about the problems people have been having. signing deals. got a buyer, seller coming together. decide on a house. the seller is so glad to have this off his or her hands. buyer so glad of the bargain, suddenly the deal falls through because the assessor comes in and the value is less than the agreed upon deal? >> the word you mechbt to use, appraiser? >> right. sorry. >> tell you what, what appraisers are doing now is essentially changing the marketplace as we know it. i can be the best real estate agent in the world and i can be the best negotiator in the world, but even though p.t. barnum told us there was a sucker born every day that sort of has changed. it doesn't matter if that sucker's out there anymore. only if the house appraises at the val of the deal made. you can't really negotiate deals
anymore. the banks are trying to cover their interest. i think that what we've seen is sort of a rebound of them being very concerned an very afraid in trying to look at their shareholders and say, we're protecting their interests, and right now the appraisal process is the only way they have to do that. >> mike, you've made a point before on this program, if you are a do that. >> if you are a seller, listen up. you need to be priced right. that goes into this whole concern of not being priced right. you got to track the buyer's interest, but at the same time you don't want to be priced too high. >> if you're overpriced in this marketplace, people will look completely past you. not only do you need to be priced right and in some places depending on what the competition is like, you need to be priced aggressively. mention that cash buyers are out there and that number is going up. what does that say to me? it says that investors think that we're nearing the bottom of the real estate market. when we see cash buyers out there, they're investors.
they think they're going to pick up great deals. it is hard for people doing financing to compete with those people. that says this may be a great marketplace to get a great deal on a piece of property if you can get the loan. >> all right. thanks so much for all that insight, mike aubrey and elyse gling. you guys have been right on about the real estate market. we're interested in your perspective. we've gone through this. gas prices are up, home prices are down, but you can still be ready to retire. yes a million dollars or at the very least get your money back on track. ♪ what do you see yourself doing after you do retire? client comes in and they have a box. and inside that box is their financial life. people wake up and realize. "i better start doing something."
we open up that box. we organize it. and we make decisions. we really are here to help you. they look back and think "wow. i never thought i could do this." but we've actually done it. [ male announcer ] visit ameriprise.com and put a confident retirement more within reach. to finish what you started today. for the aches and sleeplessness in between, there's motrin pm. no other medicine, not even advil pm, is more effective for pain and sleeplessness. motrin pm.
8% every 10 years.age 40, we can start losing muscle -- wow. wow. but you can help fight muscle loss with exercise and ensure muscle health. i've got revigor. what's revigor? it's the amino acid metabolite, hmb to help rebuild muscle and strength naturally lost over time. [ female announcer ] ensure muscle health has revigor and protein to help protect, preserve, and promote muscle health. keeps you from getting soft. [ major nutrition ] ensure. nutrition in charge!
trying to make ends meet right now. but the average american worker has a retirement savings shortfall of more than 47,000. too many workers haven't saved anything at all for retirement. donna risotto and louis bara harks. how much time do you have to save for retirement? i feel like so many people start thinking about this after they've spent so much -- time is your most important friend when you're investing or saving for retirement. people don't get a start till much later. >> well, you've got all the time in the world because -- you should be saving starting today. but people are living longer and having to work longer. so you've got to save as much as you can. i doesn't matter on time. and you got to do it and start as quickly as possible. >> you say that time savings and investing are the three levers. and if you have a lot of time, that's the best way to build to become a millionaire or to have
that big retirement. that's the most important. what if you don't have the time, what do you do? >> you can still do it, but you have to save more and you're going to have to be smarter about your investing. you know, you want to focus on low cost investments that don't eat into your return. you may want to be a little more aggressive. so you have to step up those other levers if you don't have as much time. >> you say learning about money is key here. a great piece about ways to become a millionaire. you have to do the money talk, you have to learn about money, be smart about money and learn the money talk. >> that's right. you know, a million dollars is sort of the magic number that people want to hit for retirement. it's not a bad number to focus on. it is not rocket science but you want to learn what asset allocation is, what your risk tolerance is for investing. these are not hard things to know. one thing that's helpful for people, most people have their savings, if they do, in their 401(k), and a lot of companies are offering people advice for
their 401(k)s and doing automatic enrollment which really helps. but i do think it's important for people to get this information. >> you say no matter what your job is, how much money you have, you have got to start saving. what is the best way to go about it? how should i be investing, where should i be investing. >> it is important to also note that the cash you'll need in retirement. you need to do a retirement budget. then you need to find a free retirement calculator so you can take a look at how much money you'll be investing and for how long. then you have to look at how you're investing your money. if you don't have a long time, you don't want to be so aggressive you are taking too much risk. don't be so scared because of what happened in the stock market, you're underinvesting, pitting it in short term cash type of accounts. have a nice balanced port folio. if you see someone who is an adviser.
>> donna, you say people have to be realistic about how much they need to retire. how much does it take? >> that million dollars is a nice number to shoot for, but how much you need depends on what kind of lifestyle you want to live in retirement. a lot of people underestimate how much they'll need. they think their spending is really going to drop. but particularly in the beginning of retirement, you're going to want to travel, people want to do the hobbies they never had time for. >> retirement is supposed to be about fun not about counting your pennies. but a lot of people are nervous they'll have to work longer, they're not saving enough and the value of their house is down. i can see where the anxiety comes from retirement planning. >> that's right. the simple way to figure out how much you need, there are great calculators at t. rowe price.com or i agree with louis, a fee-only person that won't sell you products that might not be best for you. a great way to look at your budget and figure out what your plan is. you may have to work longer or
save more, but once you hit retirement. >> you can read some magazines about it or read some books about it, plug, louis, or sit down with a fee-only planner and take a look at everything you have and get back on track. creative ways to get the most out of retirement assets? >> think about realigning your assets. i refinanced my mortgage, so i'll have my house paid off before i'm age 65. take a look at come preensive and see what you can pay down. because retirement lifestyle is all about cash flow. bottom line is how much you have. focus on having financial dignity in your retirement years. it's just making it a priority. think about what your life will be in the future so you can do something about it now. >> it begins with paying down debt immediately. >> that's right. you have to pay off your past before you can invest in your future. that's the best starting point maybe for people who are just trying to figure out